In 2007, the President reintroduced a plan to place new restrictions on the types of services allowable under the Medicaid rehabilitation services option (called the rehab option) to yield federal budget savings of $2.29 billion over the next five years. Currently, 47 states plus the District of Columbia provide at least some type of mental health, substance abuse, and physical health services under the rehab option. This policy brief provides an overview of the Medicaid rehab option and explores current policy issues.